Qualifying Deals at Current Market Levels

Investor · Reisterstown, MD · Member since 2015 · 56 posts · 20 votes

looking at the deals, i cant understand how people make their money in buy and holds at these price levels.

purchase price 420k, 3 units, total gross rent 4375/mo. Taxes 5500/yr, insurance 5500/yr, water 2500/yr. With 20% down at 7.5% for 30 yrs, principal interest, taxes, insurance is 3100/mo. + 250ish water a month + grounds keeping 100/mo= 3450 total expense. This excludes property management, which i were to so myself. This leaves out with about 900 cash flow or $300 per unit per month. The theme is roughly the same across the industry. How can one go in the business at these levels?

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Kate Nixon Taylor

Lender · Cary, NC · Member since 2021 · 122 posts · 29 votes

11mo

Hi Ken,

Buying turnkey does mean less cashflow in todays market on average. I have seen the investors in my area making great returns on rehab-to-rent, build-to-rent, and build-to-sell. Obviously with these deals, the ARV needs to make sense and the location of the property is crucial to force enough equity.

One of the best methods I have seen is buying a house with a lot that has enough space to develop and then subdividing the lot to build. My friend is the COO of a company doing this and making over 100% returns.

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James McGovern
Flipper/Rehabber · Bloomfield CT · Member since 2020 · 1k+ posts · 408 votes
11mo
Maybe people aren't making money and are making bad decisions. Those who are stupid help the rest of us increase profits
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Kate Nixon Taylor
Lender · Cary, NC · Member since 2021 · 122 posts · 29 votes
11mo
Hi Ken,
Buying turnkey does mean less cashflow in todays market on average. I have seen the investors in my area making great returns on rehab-to-rent, build-to-rent, and build-to-sell. Obviously with these deals, the ARV needs to make sense and the location of the property is crucial to force enough equity.
One of the best methods I have seen is buying a house with a lot that has enough space to develop and then subdividing the lot to build. My friend is the COO of a company doing this and making over 100% returns.
1 Reply
Adam BartomeoBusiness Member
Real Estate Broker · Cape Coral, FL · Member since 2015 · 2k+ posts · 1k+ votes
11mo
Robert Kiyosaki and Ken Mcelroy say something to the fact of - to be successful in real estate you need to find a way to make money when the market is going Up, Down, or Sideways.
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Drew SygitBusiness Member
Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
11mo
@Ken Chud Seems that the property will make you some money - just not make you immediately rich.
That's actually how real estate investing works!
It's not a "get rich quick scheme", it takes a LOT of effort over several years, usually at least 5-10 years.
Also see a lot of newbies thinking they have to pay asking price. NOT TRUE!
The only time I've paid asking price was on my first deal and when I can get seller financing or something else of value.
Otherwise, I look at 50+ houses/month and may make 1-2 offers.
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Peter MckernanBusiness Member
Residential Real Estate Agent · Irvine, CA · Member since 2013 · 2k+ posts · 1k+ votes
11mo
This is a base hit type of strategy not a triple or home run each time. You need to either know that and buy it for a base hit, or wait and wait for that large income property that you would like to add to your portfolio.
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Henry Lazerow
Real Estate Agent · Chicago, IL · Member since 2017 · 2k+ posts · 2k+ votes
11mo
That actually sounds like a great deal. Most properties today sell at 0-5% cash flow year 1 and are appreciation plays, outside declining markets where the cash flow is volatile with low quality tenants.

Your rents go up each year while mortgage stays the same = more cash flow in future years. For example I bought a 4 for $440k at $1100 a unit now 7 years later it’s at $1750 a unit and cash flows a ton.
2012 to 2018 it was high cash flow year 1 pretty much the years after GFC but those days long gone haha. Doubt they come back.
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